Lyndon Johnson Administration:
Israel-U.S. Discuss Arms Sales and Aid

(May 3, 1966)

In this memorandum, Israel requests upgrading to the military aircraft
that it will buy from the U.S. because the U.S. did not agree to provide
Israel with the capabilities/aircraft that was requested. There was also
some discussion on Israel's growing economic problems as German reparations
were ending, loans were due, and Israel was beginning to encounter economic
difficulties. The U.S. also asked why Israel was not more involved in
Vietnam and Israel explained that internal coalition politics and fear
of the Soviets kept the Israelis out but that they had previously wanted
economic cooperation with the South Vietnamese which may have alleviated
the Vietnam problem if it had been approved.

Israeli Ambassador Harman spent most of his talk with me this morning
outlining outstanding issues between our two governments. I chose to
listen rather than engage him, except for Vietnam. (Evron and Saunders
were present.)

First, he described three major concerns in the current aircraft negotiations:

1. Because the Skyhawk will be up against superior opposition, the
GOI wants it to have the best possible defensive equipment. Harman implied
that, since the Skyhawk was Israel's third choice, the US had some obligation
to upgrade its capability as much as possible. The Israelis want the
Sidewinder 1-C whereas we have offered only the 1-A (according to him).
They also want a radar warning system in the plane.

2. To improve performance, they want the Bullpup missile because of
its air-to-sea capacity. Israel's answer to the threat of UAR naval
bombardment is defense from the air--not a navy of its own. On the ground,
Israel wants the Rockeye II anti-tank cluster bomb to combat armored
concentrations. Harman said this would reduce the number of air sorties
required.

3. Worrying about other evidence of our "lack of forthcomingness,"
he cited our unwillingness to sell napalm bombs fitted to the Skyhawk.
He hoped we could help save expensive adaptation of their own ordnance.
He felt that with secrecy--which is in Israel's interest as well as
in ours--there would be no problem in our supplying this kind of equipment.

Second, I preempted a lengthy exposition on desalting by saying I was
thoroughly familiar and much interested. I told him the President was
also personally interested, but we all knew certain ambiguities about
the economics of the project remained. However, I was confident that
we would be in touch with them "fairly soon."

Harman said he was fully aware of the complexities and felt that perhaps
the best way to get at these was for each side to appoint one man to
"bat these problems around without commitment on either side."
He felt that "the world is going to have this but without actual
doing we cannot take the next step." He felt this project would
help open an entire new industry akin to the atomic and space industries.
Israel, because of its great need for water and its sophisticated agricultural
and industrial economy, would be a good guinea pig.

Third, Harman outlined problems in the future of our economic aid.
He accepted that the question had been resolved for this year, but was
particularly concerned about the common glowing Washington appraisal
of Israel's economy. Despite good performance, Harman said defense costs
were increasingly impairing economic progress. While Israel was very
grateful for the ten-year credits on the tank and aircraft sales, nevertheless
these would have to be paid back and would constitute a growing burden
(defense costs now 11% of GNP). Not only would Israel have to pay its
debts to the United States, but, since part of our aircraft deal required
Israel to buy elsewhere as well, it would have debts in France where
hardware is expensive.

This all comes at a time when the flow of capital to Israel is diminishing.
German reparations have ended and personal restitution to Israeli citizens
will probably end during this decade. At the same time Israel's debts
are falling due--$1.2 billion this year alone. Israel has had to slacken
the pace of its development program, and some unemployment is developing,
though very unevenly. He cited the problem of increasing industrial
exports to the Common Market, but came back to rising defense expenditures
as the prime problem--a problem we could help with.

Fourth, he mentioned the recrudescence of trouble along the Jordanian
and Syrian borders. He feared that discipline had broken down within
the Jordanian ranks because of the rapid expansion of the Jordanian
armed forces. In addition to Fatah incidents, there had recently been
several occasions of "trigger-happy" behavior by regular Jordanian
troops. A similar situation was developing along the Syrian border,
but he could not tell how that would evolve.

Fifth, he hoped we would think twice before resuming food aid to Nasser.
He felt that Nasser's requests to us were admissions of weakness which
gave us considerable leverage. Israel hoped we would not give him a
boost while he was down.

I asked him in conclusion why Israel found it so difficult to help
us on Vietnam. Internally, he said Israel's coalition government depends
in part on one left-wing anti-Communist party (Mapam), which the Prime
Minister must handle delicately. Externally, he cited relations with
the USSR as Israel's biggest problem outside the Middle East. The Soviets
have left the Israelis in no doubt that they are watching very carefully
Israel's position on Vietnam.

He denied the Israelis were "out to lunch" on this issue,
but felt Eshkol must be allowed to handle it in his own way. He felt
that if Israel had been allowed to begin a small scale training program
in Israel for South Vietnamese agriculturalists early this year, perhaps
we would not be at our current impasse. He also regretted public statements
here by South Vietnamese ambassador Vu Van Thai which set us back for
some time.